Why packaged home loan products are no longer worth it

We have been reading and researching about taking on a mortgage for the first time and have found your articles really helpful. We've come across a product from CBA and want to know your thoughts. It's CBA's MAV (Mortgage Advantage) package with a variable interest rate, repaying principal and interest. There's the ability to pay it off quickly or make additional payments and a 100 per cent offset available. The definition of "variable" says the rate is up and down; repayment will go up when the rate goes up. The annual fee is $395 a year. We wanted to know your thoughts if this is a good offset facility? And more importantly how bad can CBA choose to increase rates from time to time (despite rumours of hikes in 2018)

- Steve and Steph

Congrats for getting yourself in a position to buy property, Steve and Steph - no doubt it's been a hard slog.

But I'm not sure why you want a packaged product. Mortgage brokers - are you using one? - love to flog packages for these imagined "advantages":

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A "free" credit card - standalone mortgages are usually fee-free so much of the $395 annual package fee is for the privilege of using a credit card??? with an extortionate interest rate. Sure, "package" credit cards are often a fancy colour and come with some complimentary travel insurance, but you could get that for $150 or less separately.

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A transaction account - this too should be free but more importantly, like most big banks, the interest rate is sub-par.

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The ability to more easily add on another loan/s for rental properties - safer would be to take these out with a different lender to segregate your home from your investments, should you get into financial strife.

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Discounts on insurances.

Packages also come with waivers of some ultimately insignificant upfront fees and discounts off the advertised interest rate - of a disclosed 0.5 to 0.7 percentage points here (more can usually be individually negotiated). But you'll pay over-the-odds, regardless.

CBA's publicised discounted rate for a $500,000 loan is 4.62 per cent versus the cheapest standalone loan listed with mozo.com.au with a true offset account: a far better 3.59 per cent from Easy Street, which is a division of Community First Credit Union.

I've yet to come across an institution that offers best-of-breed of even two financial products, let alone this sweeping suite of them. Packages are a bank ploy to get their clutches into you for life. Which will really cost you.

Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at nicolehelps@fairfaxmedia.com.au.